College planning advice from a recent grad

As a fairly recent college grad and now a financial advisor, I wanted to share some thoughts on mapping out the college planning process. It’s wise to begin with the two basics: academics and finances.

Advice to Mom and Dad ...

First, as a parent, you want to make sure that your child is going to a school that suits their needs. For example, if your child is interested in engineering or nursing make sure the program is both accredited and has a high rate of placement for the school’s grads.

It’s also important to factor in location. Out-of-state schools are going to be more costly most of the time when considering that certain financial aid that would not be available to an out of state student.

Also, don’t rule out private schools based on costs. Many times we work with parents who note the list price of a private school and think that there is no way they will be able to afford it. In reality, due to certain scholarships and grants that the school is able to offer, we see that the private schools, in some cases, are actually less costly than a state school.

There are many tools available to parents to aid them in the process, the first of which is talking with a financial advisor. I would suggest that this meeting occur long before your family begins the process. Sit down with an advisor and map out the financial plan for college and the years to follow. The near term topics should include filling out the FAFSA, how to file for financial aid and other basic methods of college funding. One vital planning tool is the 529 plan. A 529 plan is a college savings account for the benefit of your child that grandparents can fund too. You can fund that account with after tax dollars and the money can be withdrawn tax free for any qualified higher education expense like tuition, room and board, books and laptops.

Each state has their own 529 plan. Wisconsin has a couple of them. Every contribution that you make, up to $3,100 annually, can be deducted from your state income taxes. If there is an overage, it has a carry over feature whereby you can deduct future taxable state income as well. Don’t miss out on the 529 plan and its tax and saving advantages.

Always make the time to apply for the Free Application for Federal Student Aid or FAFSA. So many students as well as parents don’t believe that they could potentially qualify for financial aid because they believe their income is too high. Many times families do qualify and because they didn’t go through the process of filling out the FAFSA they miss an opportunity.

Thoughts for the college-bound student ... eyes on the end goal

There are a number of ways to maintain control of spending and debt while in college. Summer classes are something that I recommend. Typically they are less costly than your fall and spring semester classes. Even one or two per year can potentially allow someone to graduate a semester or even a year early, which will definitely reduce your overall debt burden.

Pay student loan interest while still in school. Some loans require repayment while still in school and if you can begin to pay that down while still enrolled as a student, this can amount to thousands of dollars of savings in interest. What a discipline challenge for a college student who is typically in the moment! But taking the initiative to put for example $50 per month will ultimately offer significant savings over the life of the loan.

Look for work-study jobs on campus. Earnings from these on- campus jobs can also be used to pay down debt and other on going college expenses. For the disciplined student, work-study earnings that are directed back toward college expenses as opposed to dining out or patronizing the local watering hole can offer a significant savings tool for the long haul.

The role of the student is to stay on task with the end goal in mind. That is, ideally graduate on time with a job lined up with as little debt as possible. This means that the student is being responsible. We recommend that parents sit down with their student before going off to college to create a game plan and an open line of communication. That game plan includes budgeting, making sound decisions both financially and academically keeping those end goals in mind. Even graduating with an extra semester means the more college loans tacked on and there is also opportunity where you could be out in the workforce generating income to pay down that debt. Conversely, if the student needs to add on a semester, he/she is simply incurring more debt.

Once that game plan is in place, it’s the student job to execute those plans. Go to college, graduate on time and land that job and hopefully make your parents proud.

Tyler Listle is registered representative for Secure Retirement Solutions LLC and can be reached at tlistle@brokersifs.com or 920-347-9888.